Bitcoin’s dramatic plunge in late 2025 has sent shockwaves across financial markets, but Nobel laureate Paul Krugman believes the story is about more than just numbers on a screen. According to The Economic Times, Krugman frames the decline as the “unraveling of the Trump trade,” arguing that the cryptocurrency’s fortunes have become tightly intertwined with the political trajectory of former President Donald Trump. As Trump’s perceived power wanes, so too, Krugman suggests, does the narrative propping up Bitcoin’s meteoric rise.
It’s a provocative thesis, but the numbers tell a compelling tale. On November 27, 2025, Bitcoin traded near $90,474—a 3.62% gain for the day, but still a shadow of its early October heights. Just weeks earlier, on October 6, the world’s leading digital asset had peaked close to $125,000. What followed was a gut-wrenching 27% plunge to about $82,000 by November 21, wiping out all the year’s gains and marking Bitcoin’s worst monthly decline since the crypto winter of 2022. The broader digital-asset market suffered too, with nearly $800 billion evaporating from total value since the October peak, dragging the sector below $2.8 trillion.
Krugman’s take, as reported by The Economic Times, is that this crash is no coincidence. He asserts that Bitcoin’s recent rally was fueled not only by speculation, but by Trump’s open embrace of digital assets. Trump’s public support for crypto, regulatory backing, and even personal investments—reportedly worth hundreds of millions—helped create a powerful feedback loop. At one point, estimates suggested around $3 billion of Trump’s net worth was tied to crypto-linked ventures. When American Bitcoin, a mining firm backed by Eric Trump and Donald Trump Jr., debuted with a $5 billion market valuation earlier this year, it seemed to confirm the Trump family’s deep commitment to the sector.
But as political winds shifted, so did investor sentiment. Krugman points to growing bipartisan pushback in Congress, shifting voter attitudes, and declining approval ratings for Trump—fueled in part by economic anxiety and inflation worries. He highlights election results where anti-Trump messaging gained traction, and notes that even some long-loyal Republican lawmakers are distancing themselves from the former president’s agenda. In Krugman’s words: “Power is perception, and perception is unity. When it breaks, everything breaks with it.”
The notion that Bitcoin has become a political barometer is a striking one. Krugman argues that, for many investors, Bitcoin is no longer just a bet on technology or a hedge against inflation—it’s a wager on the durability of Trump’s influence. Trump’s administration championed cryptocurrency as part of an alternative financial infrastructure, proposing bold policies like a federal Bitcoin reserve and executive orders allowing retirement investments in crypto. The high-profile presidential pardon of Binance founder Changpeng Zhao sent a clear message: crypto was part of Trump’s vision for America’s future.
Yet, as the narrative around Trump’s inevitability has weakened, so too has confidence in the assets associated with him. Krugman suggests that when political certainty fades, the financial instruments yoked to that certainty can unravel just as quickly. The feedback loop that once amplified gains—confidence reinforcing investment, investment reinforcing political narrative—now seems to be working in reverse.
This political-financial link is unusually strong in Trump’s case, as The Economic Times reports. Unlike previous presidents, Trump has direct financial exposure to cryptocurrencies. His personal holdings in Bitcoin are estimated in the hundreds of millions, and his family’s business ventures are deeply tied to the digital asset world. The launch of American Bitcoin, with its splashy stock market debut, was widely seen as a sign that crypto had powerful political backing. For a time, that perception appeared to be self-fulfilling. But as market conditions soured and Trump’s political momentum softened, the risks of such close association became clear.
Of course, Bitcoin’s woes can’t be pinned solely on politics. The November crash followed a wave of negative macroeconomic news. Weaker U.S. unemployment data, fading expectations for Federal Reserve rate cuts, and a general risk-off mood hammered crypto markets harder than equities. As leveraged positions unwound and correlations with major tech stocks intensified, sentiment flipped to “extreme fear.” Major altcoins like Ethereum suffered double-digit losses alongside Bitcoin, highlighting the sector’s vulnerability to broader financial shocks.
Meanwhile, the economic backdrop in the U.S. has grown increasingly fraught. According to The Hub, inflation has been stuck around 3 percent since July 2025, defying hopes that price pressures would ease. The unemployment rate, while still relatively low, crept up in September to its highest level in four years. Job growth has been concentrated in just two sectors—health care and hospitality—while blue-collar jobs, a key focus of Trump’s economic platform, have declined. These trends have left many Americans feeling anxious about their financial prospects.
That anxiety is reflected in consumer data. By late November, approximately 76 percent of Americans viewed the economy negatively, up from 67 percent in July and higher than at any point under President Biden, according to The Hub. Consumer sentiment, after a brief summer rebound, dropped back to levels last seen in April, which were essentially the lowest since the Great Recession. Businesses, too, are feeling uncertain. The Economic Policy Uncertainty Index—a measure of how unpredictable government decisions seem to business leaders—has risen to levels not seen outside the pandemic period. Research shows that such high uncertainty tends to weigh on future business investment, raising fears of a slowdown.
Complicating matters further, a lengthy government shutdown has delayed the release of key economic statistics, leaving policymakers and investors alike “in the dark.” As The Hub notes, this lack of clarity makes it even harder to gauge the true state of the economy and to plan for what comes next.
Not everyone is convinced the situation is dire. Economist Claudia Sahm argues the labor market is simply “normalizing” after a period of outsized growth, while tech giants like Nvidia have reported strong third-quarter results, suggesting the AI boom is still very real. Yet, some analysts warn that the tech surge may be masking deeper weaknesses in the broader economy.
For investors, the message is clear: the intersection of politics, economics, and markets has rarely been more volatile. Bitcoin’s crash is a vivid example of how quickly confidence can evaporate when political narratives shift and economic anxieties mount. Whether the cryptocurrency will rebound as Trump’s fortunes wax and wane remains to be seen, but for now, the ties between politics and finance have never been more exposed.
As Americans grapple with inflation, job market uncertainty, and a shifting political landscape, the fate of Bitcoin—and the broader crypto market—may offer a window into the country’s collective mood. For now, the message from the markets is unmistakable: perception is everything, and when it cracks, even the mightiest assets can tumble.
